FUNDAMENTAL ANALYSIS
John Nguyen
EUR/USD
EUR/USD is ending this week 1.26% higher to trade at the 1.021 price zone, due to the poor performance on Wall Street this week and the bearish performance of the US government bonds. We can potentially see a rise in the pair as the US Federal Reserve has adopted its most aggressive quantitative tightening policy, with rates lifted by 150 basis points as the CPI surged to 9.1% in June, well above the 8.6% expected by the market. In addition to this, the European Central Bank has announced the use of the Transmission Protection Instrument (TPI), which is a new anti-fragmentation tool, allowing the European Union (EU) to support the effective transmission of monetary policy across all its countries. This is a new bond purchase scheme aimed at helping more indebted Union countries and to avoid financial fragmentation within the EU.
GBP/USD
GBP/USD saw a technical rebound to end the week 1.02% higher at 1.2024, snapping three straight weekly declines with the impending bounce of the Pound due to the foreshadowing of a recession in the US. The recent tightening of monetary policy for the US has allowed the Pound to recover and bounce back from its two-year low of 1.1760. Although there is uncertainty surrounding the current state of the UK’s political scene, the speculators have pushed the price up amid the US Fed interest rate decision, GDP and inflation data. The Fed’s ‘blackout’ period carved out a perfect opportunity for GBP/USD to attempt a comeback after being dumped to the lowest level since March 2020 a week ago. We can potentially see a possible rise in the Pound against the weak US dollar,due to aggressive tightening of macroeconomic policies to control and minimise inflation which currently sits at 9.1%.
TECHNICAL ANALYSIS
William Lun
EUR/USD
After reaching parity on the 14th of July, EUR/USD saw a retracement last week. Right now, price is at the 50% retracement level and the 21 daily moving average. A retracement further will likely see resistance found at the 61.8% level and a resistance area of 1.03635 marked in purple. A failure to hold this current level could see price move back to parity.
GBP/USD
GBP/USD too retraced last week after bottoming out on the 14th of July. Right now price is at the resistance level marked in purple. There are two rejection candles on the 4 hour chart, marked by the red arrows. A meaningful break above this level could see price retrace further to the 1.216 level. A rejection of the current level could see price return to the 1.946 level or, if it falls further, to the 1.1799 level.